Friday, 8 July 2016

The new Viking/Laval? AG Wahl argues that requirement for prior authorisation of collective redundancies breaches Article 49 TFEU

Menelaos Markakis

DPhil Candidate, University of Oxford. Academy of Athens and Modern Law Review scholar.

The Advocate-General’s recent opinion in CJEU Case C-201/15 AGET Iraklis is both interesting intellectually and significant politically. AGET Iraklis, which is a subsidiary of LafargeHolcim, is active in the fields of manufacturing, distribution and marketing of cement and has three plants in Greece. As the construction sector took a heavy blow from the economic crisis, AGET Iraklis’ sales plummeted and the company sought to reorganise its business. Under Greek law, a company seeking to carry out collective redundancies has to consult with the workers’ representatives prior to taking action. It was disputed during the hearing whether the company had indeed done so. More importantly, the Minister of Labour is given the power to extend the deadline for such consultations or to refuse to authorise some or all of the projected redundancies. It was the exercise of the latter power by the Greek Minister of Labour which gave rise to the dispute in the main proceedings (Greek Council of State (Fourth Chamber) Decision no 1254/2015).

The company sought to argue that the impugned national rule was not compatible with Council Directive 98/59/EC on the approximation of the laws of the Member States relating to collective redundancies and Articles 49 (freedom of establishment) and 63 (free movement of capital) of the TFEU. The Greek Council of State, which is in many ways the supreme administrative court of the land, asked the CJEU whether the contested rule contravened the aforementioned rules and in case the answer to the preceding question was in the affirmative, whether it could perhaps be justified ‘if there [were] serious social reasons, such as an acute economic crisis and very high unemployment’.

The Advocate General opinion

AG Wahl delivered his opinion on the case on 9 June 2016. He argued that the impugned national rule was ‘wholly unconnected’ to Directive 98/59, insofar as that directive ‘[did] not govern the employer’s freedom (or lack thereof) to effect collective redundancies’. As such, Directive 98/59 did not preclude, said he, the enactment of the contested provision (paras 23-34 of the opinion).

As regards EU primary law, AG Wahl opted to examine the contested national rule from the standpoint of the freedom of establishment (paras 35-45). He argued that a requirement for prior authorisation of collective dismissals constituted a restriction on freedom of establishment (para 47). ‘Indeed, in the main proceedings the rule at issue limits an employing undertaking’s freedom to make collective redundancies since, unless the rule is complied with, those redundancies will be invalid. Such a rule thus directly interferes with the internal organisation of undertakings and with the management of their staff, possibly exposing undertakings to the risk of operating at a loss.’ He further argued that Article 49 TFEU should be interpreted in the light of Article 16 of the EU Charter of Fundamental Rights (freedom to conduct a business) and that the impugned national rule restricted the exercise of the latter freedom (paras 49-50).

The Greek Government sought to argue that the contested rule was justified on the ground of the protection of workers, which is an overriding requirement in the public interest. The impugned law provides that applications to carry out collective dismissals are to be considered on the basis of the following criteria: ‘the conditions in the labour market’; ‘the situation of the undertaking’; and ‘the interests of the national economy’. Authorisation is a condition for the validity of the redundancy measures.

AG Wahl argued (para 66) that the interests of the national economy ‘involve[d] a purely economic objective which [could not] justify restricting the freedom of establishment (nor the freedom to conduct a business)’. As regards the conditions in the labour market and the situation of the undertaking, these criteria were, said the Advocate General, ‘neither appropriate for achieving the objective of protecting workers, nor limited to what [was] strictly necessary in order to achieve that objective’ (para 67).

As regards the conditions in the labour market, AG Wahl noted that, in the event of an administrative refusal to authorise the planned redundancies, the workers would fare even worse, since ‘that undertaking would have a clear incentive to commence proceedings for its dissolution and winding-up, after which it would no longer be bound by Directive 98/59 … and, presumably, would not have the funding required to remunerate the workers concerned in the event that the rule at issue were to continue to apply to such a situation’ (para 68). ‘That would, incidentally, also endanger the jobs of those workers who have not been made redundant.’ As such, AG Wahl expressed his ‘doubts’ as to whether ‘the rule at issue might contribute, in any meaningful way, to lowering the unemployment rate’. In any event, this criterion was not suitable, said he, for achieving the objective pursued, as ‘it [did] not remedy the problems which [had] made the employment situation of the workers concerned uncertain’ and essentially ‘amount[ed] to denying the employers’ right to terminate an employment relationship on the ground that it [was] generally not desirable to have more unemployed persons’ (para 69).

As regards the possibility to rely on the situation of the undertaking for the purposes of blocking collective dismissals, AG Wahl noted that the contention that the authorities of a Member State might be better suited than the management of that undertaking to determine what is most appropriate in its situation struck him as ‘nothing less than remarkable’ (para 70). ‘At any rate, I do not find it appropriate to protect workers by letting an authority overrule the business decisions ultimately taken by the employing undertaking.’ He added that:

Moreover, as argued by the Company, the statutory criteria are unclear and afford excessively broad discretion to the administration, to the detriment of the legal certainty of the employers. This, in fact, appears to frustrate from the outset any possible attempts at reaching a friendly settlement between the employers and the workers by doing away with the need for negotiations – as witnessed in the matter under consideration. An alternative might have consisted in listing the types of dismissals considered to be unjustified, as in the case of the list which appears in paragraph 3 of the section of the Appendix to the Social Charter relating to Article 24 thereof (para 71).

Furthermore, the Greek Government failed to show, said the Advocate General, that the impugned measure complied with the principle of proportionality, nor did it provide in his opinion specific evidence substantiating the arguments raised (para 72). He added that:

Indeed, by restricting the employer’s ability to dismiss the workers collectively, the rule at issue merely gives the impression of being protective of workers. To begin with, that protection is only temporary until the employer becomes insolvent. Even more importantly, workers are best protected by an economic environment which fosters stable employment. Historically speaking, the idea of artificially maintaining employment relationships, in spite of unsound general economic foundations, has been tested and has utterly failed in certain political systems of yesteryear. That provides confirmation that, in laying down an effective yet flexible protective procedure, Directive 98/59 affords genuine protection for workers, whereas a system of prior authorisation such as that at issue, which tellingly falls outside its scope, does not (para 73).

As such, the Advocate General concluded that the impugned rule was not suitable for the attainment of the objective pursued and that, in any event, it went beyond what was necessary to achieve that purpose (para 76). Moreover, ‘the presence of an acute economic crisis accompanied by unusual and extremely high unemployment rates’ was said to be incapable of justifying the impugned restriction (para 77). This was, said the AG, because ‘[t]hose circumstances, although clearly very serious, [could not] justify restricting the freedoms of establishment and to conduct a business when the statutory criteria [could not] do so on their own’; ‘an acute economic crisis and very high unemployment rates amount[ed] in themselves – at least in part – to purely economic factors’; ‘the socio-economic effects resulting from collective redundancies [were] felt in a given local context and social environment, not at the national level’; and ‘there [was] no reason to believe that a severe economic crisis would not affect businesses just as much as workers’ (paras 78-79). The AG further noted that ‘as the Commission state[d], in times of crisis, it [was] just as important to reduce all the factors which deter[red] new undertakings from investing, as economic efficiency [might] help stimulate job creation and economic growth’ (para 80). ‘That, I presume, is the reason why Greece, as a condition for the financial assistance provided by the European Stability Mechanism, accepted to “undertake rigorous reviews and modernisation of collective bargaining, industrial action and, in line with the relevant EU directive and best practice, collective dismissals, along the timetable and the approach agreed with the Institutions. On the basis of these reviews, labour market policies should be aligned with international and European best practices, and should not involve a return to past policy settings which are not compatible with the goals of promoting sustainable and inclusive growth”.’


The AGET Iraklis case arose from the Greek crisis and gave rise to the first Article 267 TFEU preliminary reference from the Greek Council of State to the CJEU in this context. Although the impugned rule was not used as a ‘vehicle’ for indirectly challenging the bailout terms agreed between Greece and its creditors, the case could nevertheless be said to form part of a group of cases brought before the CJEU concerning the legality of national economic policy measures that were enacted in response to the economic crisis. These include the Romanian MoU cases (Cases C-434/11, C-462/11, C-134/12, and C-369/12); the Portuguese MoU cases (Cases C-128/12, C-264/12 and C-665/13); a couple of Greek cases concerning a Council decision adopted within the framework of the excessive deficit procedure (Cases T-541/10 and T-215/11); and a number of cases arising from the Cypriot banking crisis (Case T-327/13; opinion in Joined Cases C-8/15 P, C-9/15 P and C-10/15 P; opinion in Joined Cases C-105/15 P to C-109/15 P; see comments by René Smits).

There is no doubt that the impugned national rule in AGET Iraklis might hinder or render less attractive the exercise of the freedom of establishment, which includes the right of departure from a Member State. It might further constitute a restriction on the freedom to conduct a business which is enshrined in Article 16 of the EU Charter. The application of the Charter is triggered insofar as Greece could be said to derogate from the freedom of establishment. The relationship between the freedom to conduct a business and workers’ rights is clearly complex (see the report by the European Union Agency for Fundamental Rights, Freedom to Conduct a Business: Exploring the Dimensions of a Fundamental Right (pages 9-10), and exigencies of space preclude detailed analysis of this. However, it should be noted in this connection that Article 16 of the Charter can be and indeed is used by corporations to challenge various regulatory requirements which are seen to stand in their way, as evidenced by the factual background to the recent Lidl judgment (in which the argument was unsuccessful).

The Court rulings in Viking Line and Laval set the pace for the relationship between fundamental economic freedoms, on the one hand, and collective labour rights, on the other. Depending on what the Court’s ruling will be, AGET Iraklis might as well soon form part of this group of cases and could also be said to be linked to the Court’s ruling in Alemo-Herron. The reader might perhaps be struck by the tone of the AG opinion, but the reality is that the AG undertakes a careful and balanced analysis of the relevant substantive issues. This is perforce conjecture, but the Court might as well follow the AG opinion, albeit with slightly different wording.

Taking a step back from the pressing legal questions facing the Court in the AGET case, it is clear that the applicant in the main proceedings was caught between a rock and a hard place. Construction activity had come to a grinding halt, but AGET Iraklis failed to obtain the requisite ministerial authorisation and therefore could not carry out collective dismissals, which were a vital part of its restructuring plan. It could only lay off its workers at a pace which would not be caught by the national rules on collective dismissals, but the lay-offs in one of its plants were reportedly found by lower courts to be invalid. On the other hand, the workers that would have been affected by the actions of the company would have been left without a job in a country where the unemployment rate was, according to the order of reference, 27.3% in 2013. The rate for 2014 was 26.5% (note 25 of the opinion), which was clearly not much better either.

It is important to note that the AG opinion leaves some scope for a more ‘balanced’ rule which would not undermine the effectiveness of prior consultations (para 71 of the opinion).[i] What is nevertheless noteworthy is that the AG concluded his opinion with reference to the bailout terms agreed between Greece and its creditors. Had the Court been asked to rule on the validity of these terms from the standpoint of EU law, it would have probably declined jurisdiction, as it did in the Romanian and Portuguese MoU cases. It remains to be seen whether ‘two-pack’ legislation will have an impact in this respect. Be that as it may, the point of controversy in AGET Iraklis might soon become moot, as the relevant issue will be negotiated between Greece and its creditors in the second review of the ongoing ESM programme in the fall of 2016.

Further reading:

On the legality of national economic measures on the economic crisis: see e.g., Federico Fabbrini, Economic Governance in Europe: Comparative Paradoxes and Constitutional Challenges (OUP 2016) ch 2; Alicia Hinarejos, The Euro Area Crisis in Constitutional Perspective (OUP 2015) ch 8; Anastasia Karatzia (presenter) and Theodore Konstantinidis, ‘Who Is Responsible? The Issue of Liability in the Context of EU Macroeconomic Adjustment Programmes and Austerity Measures’ (FIDE Doctoral Conference, Budapest, 18 May 2016).

On economic freedoms and labour rights, see particularly, from the copious literature, Mark Freedland and Jeremias Prassl (eds), Viking, Laval and Beyond (Hart Publishing 2015).

For detailed discussion of the legal quality of the bailout terms and the scope of application of the EU Charter, see Catherine Barnard, ‘The Charter, the Court – and the Crisis’ (2013) University of Cambridge Faculty of Law Legal Studies Research Paper 18/2013; Paul Craig, ‘The Eurogroup, Political Power and Accountability’ (Governing Finances in Europe: Shifting Regimes and Shifting Powers conference, Uppsala, 27-28 May 2016); Alicia Hinarejos (above) 131-36; Claire Kilpatrick, ‘Are the Bailouts Immune to EU Social Challenge Because They Are Not EU Law?’ (2014) 10 EuConst 393; Koen Lenaerts, ‘Exploring the Limits of the EU Charter of Fundamental Rights’ (2012) 8 EuConst 375; Steve Peers, ‘Towards a New Form of EU Law? The Use of EU Institutions outside the EU Legal Framework’ (2013) 9 EuConst 37, 51-53; Napoleon Xanthoulis, ‘The Participation of Union Institutions in the European Stability Mechanism: Between International Law Competences and EU Treaties Restrictions’ (Jean Monnet Doctoral Workshop, City University of London, 23-24 June 2016).

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Barnard & Peers: chapter 20


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